Lateral thinking can help beat budgetary squeeze

Lateral thinking can help beat budgetary squeeze

Transport planners across Europe face unprecedented pressure on budgets and greater demands to achieve value for money. However, I believe that local authorities can help plug the gap with some creative use of their existing assets.

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By David Smale, KPMG in the UK

Transport planners across Europe face unprecedented pressure on budgets and greater demands to achieve value for money. The threat to socially-necessary but unprofitable transport lines appears greater than ever. However, I believe that local authorities can help plug the gap with some creative use of their existing assets.

In the UK, central government has reduced funding to local authorities at the same time as cutting fuel subsidies to transport operators. In 2015, the transport budget reduced by £545 million, a near 2% cut.1

Against this there is increasing need for high quality public transport to compete with private car ownership. A common theme amongst transport planners and local authorities therefore is needing “to do more with less”. To help achieve this I think it is important to think laterally about funding sources.

I would urge all local authorities to create a mobility strategy for residents, businesses and visitors that is integrated across all operators and departments. For example aligning public transport priorities across education, healthcare and other departments can cut costs, boost revenues and protect vulnerable services by avoiding policy conflicts.

Broad thinking is needed to create effective partnerships across participants. For example, it is no good trying to promote public transport use while reducing parking charges in the city center - the two programmes should work towards the same objective.

Once city authorities and public transport operators have a joint vision, councils need to make the most of the assets that they have to support their transport networks.

Sponsorship is one option – instead of simply placing advertising on buses or trains, having a long-term brand connection can provide a more stable income stream. The Emirates cable car in London is a good example.

City managers also need to look at using their transport properties to generate income. Space can be rented for phone masts, advertising, solar panels or for creating new business premises. Unused space can be turned into concert venues, theatres, bars or festival space – a car park in Peckham has done all of these. In Bristol, the redevelopment of Bristol Temple Meads station should significantly improve passenger facilities while increased business use is expected to generate more revenue to pay for the investment.

It is up to each city government to decide their own fund-raising methods. A congestion charge could provide an income stream, but if it risks destroying trade in the city center, then they should think again. Alternatively, if the council provides and promotes good public transport links, people might prefer to come to a traffic-free center.

Without effective transport, cities do not function. Transport supports education, social mobility and commerce all of which are wider social policy objectives of most authorities. In New York they recognize this and raise finance from business taxes accordingly, including a 0.25% sales tax and a corporate tax surcharge.2 The tax revenue goes into investment funds to support its transport network, allowing for a stable income.

In the UK, some businesses have come together to create Business Improvement Districts (BIDs) where they collectively fund local street scene and infrastructure improvements. Bristol has a number of the most successful BIDs in both the city center and neighborhood retail areas.

Some combined authorities in the UK, such as those around Manchester, are seeking greater devolved powers over their cities, including the ability to deliver transport schemes. These authorities have the responsibility to invest and fund their transport solutions. So they will need stable sources of income to be able to continue to provide services.

Greater certainties over funding sources should allow authorities to invest in new technologies like driverless vehicles. This could be particularly valuable around non-core networks, delivering a more efficient service.

By focusing on alternative sources of funding, local authorities can secure the future provision of their services. There is no magic bullet, and council leaders must analyze where their strongest revenue streams are likely to be, whether that be leasing or sponsoring assets or taxing road or business users in a geographical area. It is no longer possible to rely on government subsidy and passenger revenue alone.